C2005/4050, Transcript of Proceedings [2005] AIRCTrans 1619 (26 July 2005)

TRANSCRIPT OF PROCEEDINGS

---


Workplace Relations Act 1996 12267-1

SENIOR DEPUTY PRESIDENT ACTON

C2005/4050

ICON AUTOMOTIVE PTY LTD
AND
NATIONAL UNION OF WORKERS AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION LIQUOR, HOSPITALITY AND MISCELLANEOUS UNION
s.127(2) - Appln to stop or prevent industrial action
(C2005/4050)

MELBOURNE

2.08PM, MONDAY, 18 JULY 2005

Hearing continuing

PN1

MR R MARASCO: I am from the Australian Industry Group representing Icon Automotive Pty Ltd. With me is MR W BENTON who is a partner of PPB, the administrators of the company.

PN2

MR A PORTELLI: I represent the NUW.

PN3

MR M ADDISON: I appear on behalf of the Australian Manufacturing Workers' Union, together with MR T BRADLEY ..... the delegate from the job.

PN4

MR B REDFORD: I appear for the LHMU in this matter. I am joined at the bar table by MR G HOGAN, also from our union.

PN5

MR A WOOD: I seek leave to appear as counsel and so seek leave to intervene in respect of my three clients, Toyota, Holden and Ford. If the Commission pleases.

PN6

THE SENIOR DEPUTY PRESIDENT: Are there any objections to Mr Wood's application for leave to appear and intervene?

PN7

MR REDFORD: No, your Honour.

PN8

MR ADDISON: No, your Honour.

PN9

MR PORTELLI: No, your Honour.

PN10

THE SENIOR DEPUTY PRESIDENT: Leave is granted. Mr Marasco?

PN11

MR MARASCO: Are you asking me about the intervention or the leave, because there's no objection to either of them.

PN12

THE SENIOR DEPUTY PRESIDENT: No. I've already granted leave.

PN13

MR MARASCO: Okay.

PN14

THE SENIOR DEPUTY PRESIDENT: No one has jumped up.

PN15

MR MARASCO: Great. This is an application pursuant to section 127 of the Workplace Relations Act for orders to cease unlawful industrial action. Your Honour, we've emailed your associate earlier today an updated application.

PN16

THE SENIOR DEPUTY PRESIDENT: Yes.

PN17

MR MARASCO: There's also just been an amendment to it at the top. There's three separate enterprise agreements, one with the NUW then there's a separate one with the AMWU and there's also one with the LHMU and the name of that agreement doesn't appear at the top of our application. I did have a short conversation with Mr Davey from the LHMU and he did indicate to me that there is a current EBA in place with the LHMU, but neither your associate or I were able to find it on the database. But, I'm sure we can provide you with a copy of it or, at least, a number in due course.

PN18

THE SENIOR DEPUTY PRESIDENT: Okay.

PN19

MR MARASCO: If I can just tell you a bit about the matter, your Honour. The company was bought off Nylex in October last year, Nylex being a listed company. Icon Automotive Pty Ltd is a private company which 100 per cent of the shares are owned by a company called MDJ Pty Ltd. On 11 July 2005 the company was placed into voluntary administration and Mr Benton, with me, was appointed as administrator. There are 105 employees covered by the various enterprise agreements with the relevant unions. There was a meeting last Friday between the administrators and the unions and the employees. At the mass meeting the employees expressed and the unions expressed concern about their entitlements and accordingly those were to go on an indefinite strike while that issue of entitlements was undetermined.

PN20

The company is a first and second tier supplier for Toyota, a first and second tier to Ford and a second tier supplier of Holden. It does supply a lot directly to Nylex that then does on supply to Holden. The company also supplies to other industries including Kamik which manufactures water tanks for caravans. They also operate in a just in time system and have indicated that they will run out of stock tomorrow. I understand that Toyota and Ford will also run out of stock either today or tomorrow as well. The other clients that are coming are Araco, Icon is a first tier supplier for Araco which then on supplies to Toyota and the company also supplies to AAA which make the air-conditioning units that are supplied, I understand, to all four car companies. It also supplies directly to Soccerbell and Venture.

PN21

THE SENIOR DEPUTY PRESIDENT: What does it do?

PN22

MR MARASCO: It manufactures plastic components that I understand go underneath the bonnet and underneath the dashboard of the vehicles. Like, I think, air-conditioning and also valves. I did make a note. Air intake ducts. So it's difficult for the car companies to refit those components because they go underneath the bonnet and underneath the dashboard. Plastic blow mould, I understand, they're called. So, under bonnet air-conditioning and air flow components. The administrators, their aim is to keep the company as a going concern. There is sufficient funds to pay employees wages, if they do return to work. I understand that the company is seeking to make 16 people redundant, but it's not the intention of the administrators to liquidate the assets or to make all the employees redundant. It's very important to try to keep the company as a going concern and possibly to sell the company, but that can't be done while they're on strike action.

PN23

In relation to an application under section 127, your Honour, we say that we have met the jurisdictional requirements for the Commission to make an order namely first, industrial action is happening at the moment at the company and secondly, the industrial action is covered by current certified agreements. There are no bargaining periods in place or notices of protected industrial actions, for the action is clearly unlawful and the third jurisdictional point is that the application is brought by a person who's likely to be directly affected by the industrial action. We submit that Icon Automotive is such a person in this case and we have met the jurisdictional requirements. I won't address you at this stage on the discretionary components, your Honour, as the administrator would like to go into conciliation to discuss the matter further.

PN24

We are certainly keen to have ongoing discussions with the unions and the affected employees, but we believe it's imperative that there's an undertaking from the unions that there is as immediate return to work so those discussions can occur. And unless your Honour has any questions for me, that would conclude my preliminary submission.

PN25

THE SENIOR DEPUTY PRESIDENT: Thank you. Mr Wood.

PN26

MR WOOD: Your Honour, we don't oppose to conciliation. If I may just briefly put the position of the vehicle companies. We do have today three witnesses, one each from my clients who can provide some evidence on the impact of the current difficulties at Icon. Mr Marasco summarised those, but I can perhaps put it more pointedly. The vehicle industry has not faced a more compelling situation for some time. Certainly in respect of Toyota and Ford there is the very real and immediate prospect of the requirement for stand downs to occur. Both of those companies have sufficient supplies according to the just in time operations to last until at some stage tomorrow. At that point, that would require those companies to consider alternatives.

PN27

Obviously, the most undesirable but perhaps the most immediate of those options available is standing down employees. In respect of Holden, they are in a slightly less invidious position that they have sufficient stocks in hand until Thursday of this week, in contrast to Toyota and Ford which effectively run out tomorrow. All of those clients that I represent are exporters. In particular Toyota, some 60 per cent of their production is export production. That means that any day of industrial action for them puts in peril the opportunity for those export orders to be met and accordingly has an immediate and direct impact on their market share and production capacity generally.

PN28

So by way of introduction, your Honour, the impact is direct, it's immediate and it's a serious threat such that I'm instructed that employees of my clients have been informed, virtually as we speak, about the difficulties confronting them as a result of the situation, impending options and indeed intended likelihood of a stand down. So I would foreshadow that that evidence be called if it be necessary. I'm hopeful that with some undertaking, perhaps in conference, that might not be necessary.

PN29

THE SENIOR DEPUTY PRESIDENT: Mr Portelli.

PN30

MR PORTELLI: Your Honour, our view would be, and I think a view shared by my colleagues here, that we should be retiring to a conference at this point and to discuss whatever options are available to us.

PN31

THE SENIOR DEPUTY PRESIDENT: Mr Addison?

PN32

MR ADDISON: I do, your Honour. I think it's important that we put some propositions on the record with regard to the employees of this company. I agree with what my friend, Mr Marasco, has said that the company was transferred from Nylex to the current owners. I understand that the financial position currently is that the current owners are subject to a fixed charge from GE Capital to the value of $3.3 million. I understand there are also unsecured creditors to the value of about $2.9 million, but the employees in this company are owed a total of
$7.4 million, your Honour. The employees are long term employees and their accumulated entitlements are to the value of $7.4 million, which is a significant amount of money.

PN33

Your Honour, we have had some discussions with the administrators at this point. I spoke to the administrators on Thursday evening and some length and we have also met with the administrators and the company director this morning. A creditors meeting was held at 11 o'clock this morning with regard to the current circumstances that the company finds itself in. We have had some preliminary discussions. We think that we can usefully use this afternoon to continue those discussions. We understand that everybody's in a bit of difficult at the moment, not least of all our members, the employees. We would seek to see if we can reach some agreement with the parties this afternoon. If your Honour pleases.

PN34

THE SENIOR DEPUTY PRESIDENT: Mr Redford.

PN35

MR REDFORD: Your Honour, LHMU supports what the other unions have said to you this afternoon. We also support the proposition of going into conference at this time.

PN36

THE SENIOR DEPUTY PRESIDENT: I'll adjourn into conference.

OFF THE RECORD

PN37

THE SENIOR DEPUTY PRESIDENT: Mr Marasco.

PN38

MR MARASCO: Thank you, your Honour. Before we adjourned into conference I outlined the jurisdictional component that are contained in the section 127. We believe that the Commission does have jurisdiction to grant the orders in the terms sought. Turning to the discretionary component just briefly, I'd just like to indicate that the company itself, Icon, would suffer a loss of $60,000 per day whilst the industrial action is occurring. So that's the economic loss that the company would suffer and Mr Wood, I'm sure, will give evidence about the economic loss that the car companies will suffer as a result of industrial action. It will now be my intention to call Mr Benton to give evidence about this matter.

<WAYNE EDWARD BENTON, SWORN [3.06PM]
<EXAMINATION-IN-CHIEF BY MR MARASCO

PN39

MR MARASCO: Mr Benton, for the record can you please state your full name and work address?---Wayne Edward Benton care of (address supplied).

PN40

And can you tell the Commission your occupation?---I'm an accountant specialising in business reconstruction.

PN41

And how long have you been a partner at PPB?---Approximately 10 years.

PN42

And can you tell the Commission when were you appointed as administrator for Icon Automotive Pty Ltd?---Last Monday, 11 July at 9.40 am.

PN43

Can you tell the Commission the circumstances in which you were appointed to be administrator?---It was by majority resolution of the board of the company.

PN44

And what type of administration was it?---It was appointment of section 436A of the Corporations Act.

PN45

And why did the board seek to go into administration?---The board passed a resolution that the company was likely to become insolvent.

PN46

Can you tell the Commission what the company Icon manufactures?---The company manufactures predominantly to the automotive industry, specifically under bonnet componentry. It's major customer base, or its major customers representing approximately 80 per cent of it's trade are Ford and Toyota.

PN47

And can you tell the Commission, is the company first and second tier suppliers to Ford and Toyota?---Yes.

PN48

And can you give any indication to the Commission when Ford and Toyota have said that they will be in trouble in terms of production because of the limit in supply?---Well, just based on discussions that I've had with it, I understand that respective stand downs will be necessary. I was told in the case of Ford, possibly today, in the case of Toyota, possibly tomorrow.

PN49

And can you tell the Commission the other clients or customers of Icon?---Yes. Nylex itself is a major customer and others I can't be specific.

PN50

But you'd be aware that the Soccerbell, Araco and Kamik?---Yes. I am aware that there's not a huge customer list, but the customer they do have represent the majority of it's customers.

**** WAYNE EDWARD BENTON XN MR MARASCO
PN51

I just want to take you to the chronology of events that occurred. So, you were appointed administrator on 11 July?---Yes.

PN52

And can you tell the Commission when did you first have meetings with the unions?---It wasn't myself but my co-appointee, Rod Slattery, met with the unions, I think on the Tuesday.

PN53

12 July?---Correct. There was telephone conferences with them, I think, on the Friday just as a matter of courtesy letting them know of our appointment, or impending appointment at that stage.

PN54

Yes. And when was the next time you had discussions or meetings with the unions?---Via my staff, there was various telephone discussions held with representatives of the union between that Tuesday and the ultimate Friday when we were informed that there was to be a mass meeting of employees which, of course, we weren't invited to but we were there to overlook - or, I beg your pardon - see the results of those. We were invited in to address all the employees on that Friday.

PN55

So that was Friday, 15 July you attended the company at Huntingdale?---Yes.

PN56

The company is situated at Franklyn Street, Huntingdale?---Yes. That's correct.

PN57

And when you were invited to address the meeting of employees, was that all shifts or what time was it?---No. It was approximately 10 am, thereabouts. It wasn't all the shift. The afternoon shift was not included.

PN58

Right. And how many employees were there at that meeting approximately?---I would have thought 80 or so.

PN59

So the majority of employees?---The majority of employees, yes.

PN60

Can you tell the Commission how many shifts does the company
operate?---There's three.

PN61

A day, afternoon and night?---Correct.

**** WAYNE EDWARD BENTON XN MR MARASCO
PN62

Right. What did you say at the meeting, just roughly and briefly?---I said to the employees that it was the charter of myself and Mr Slattery as joint and several administrators to try and save the company and the business by implementing a program of cost rationalisation which would include redundancies of up to 16 people, but those redundancies to be worked out in conjunction with the unions because we'd heard representations from management that a number of the highlighted redundancies were, in fact, not able to be given effect by virtue of the fact it was wanted or needed work. So we hadn't actually gone that far. We were going to endeavour to renegotiate with the landlord for rental reductions and implement various initiatives to increase productivity with a view to returning this company to profitability and that would be offered via what we call a deed of company arrangement. Failing that, we would at the same time set about a sale of business campaign. What I offered the employees that that if it was under my administration, a retention of jobs during the period of the administration and that I would use my best endeavours to negotiate and open lines of negotiation with other parties including Nylex with a view to funding the shortfall in redundancy and superannuation entitlements. I placed the employees on notice that it was my view that in the event that a strike was to be given effect, then that would have the effect of bringing to an end the underwriting agreement which Ford and Toyota had granted upon myself and Mr Slattery as administrators which was negotiating pre appointment to indeed fund the losses which are estimated at $60,000 per month and indeed fund the fees and costs of Mr Slattery and myself as administrators. I informed the employees that a strike action would have the effect of bringing that indemnity agreement to an end because it was a key condition of that indemnity agreement that supply continue to those motor companies. And in the absence of indemnity, then overheads continue at the factory such as rent, power, security, insurance et cetera which was unfunded and that I would be then forced, I would have no obligation in the absence of further funding from Toyota, to invite GE Finance the mortgagees over the plant, debtors or invite them to appoint a receiver and manager to do whatever they thought was appropriate. And it was my view, as I expressed to the employees, that given the decision had been made for that receiver and manager, in other words as a cessation of business, that the 420A obligations of the receiver and manager under the Corporations Act to get market value for the business would not able to be implemented because the business was shut and the receiver would most likely just proceed to auction off the plant and equipment, which would mean the job losses of employees in addition to the deficiency in the redundancies. That's what I said to the employees.

**** WAYNE EDWARD BENTON XN MR MARASCO
PN63

THE SENIOR DEPUTY PRESIDENT: Hang on. That was a long answer. I want to clarify some aspects of it. I think you said you'd given - commitment might be too strong a word, but you told the employees that jobs would be retained during the administration. That's the jobs less the 16 likely redundancies?---Not necessarily that. Because Ford and Toyota are underwriting the whole of the cost, capped at a loss of $60,000 which includes 16, so to that extent those jobs are secure. But in order to save the company going forward at the end of the administration, there needs to be some sort of cost rationalisation because the company can't sustain without the funding of Ford and Toyota those ongoing losses and if we can reduce inefficient labour, including the 16 - I'm not saying that's all of them, including them - then it paints a brighter picture for the company going forward.

PN64

How do you arrive at 16?---That was the number painted to me pre appointment. So I haven't specifically gone down the- - -

PN65

By whom?---By management. By the directors, in fact.

PN66

So the view was put to you that to be profitable you needed to get rid of 16 employees, was it?---Yes. Well, to get on the road to reducing the cost. That if you got rid of 16, all of whom I understand are on some form of light duty, that would assist in returning the company to profitability. There needs to be other initiatives as well, but that's probably the major one.

PN67

I see. And the underwriting agreement by Ford and Toyota, that covers what, can you tell me again?---It covers trading losses up to $60,000 per month and my fees and costs on a monthly basis - I think I've estimated them at about $150,000 plus one off costs such as legals, insurance and occupational health and safety orders.

PN68

So they'll cover trading losses to $60,000 per month?---Yes.

PN69

And your costs?---Yes.

PN70

And plus other incidentals, I'll call them?---Yes.

PN71

But that underwriting agreement only survives while work is being undertaken?
---Whilst the company is delivering the products as ordered to Ford and Toyota, yes.

PN72

Right.

**** WAYNE EDWARD BENTON XN MR MARASCO
PN73

MR MARASCO: So that's what you said to the employees?---Yes.

PN74

What happened then after you addressed the employees and gave them that information?---Well, we were then asked to leave the meeting.

PN75

Who was it that asked you to leave?---It was David Oliver.

PN76

Dave Oliver was there?---Yes.

PN77

So he was conducting the meeting?---Yes.

PN78

And what happened then after you were asked to leave?---We just waited and we were then told, I can't recall by who, that the union had called a strike. Or the employees - I beg your pardon - had called a strike.

PN79

What further information were you given about that strike?---That there was to be a reconvening on Tuesday morning.

PN80

Which is tomorrow?---Yes.

PN81

Right. And no other information was given?---No.

PN82

Are you aware whether any employees came to work today?---I'm not aware, no.

PN83

And what about administrative staff not covered by the EBA?---Yes. I laid all those staff off.

PN84

So no one is at the company today working?---No, correct.

PN85

I've got no further questions.

PN86

THE SENIOR DEPUTY PRESIDENT: So, following the meeting you met with Mr Oliver. Is that right?---No. Following the meeting we just, I spoke to, I think it was an employee and maybe one other union official. I can't recall who it was. There was no formal meeting after that.

PN87

Okay. Who told you there was going to be a reconvening of the employees on the 19th?---I can't recall.

**** WAYNE EDWARD BENTON XN MR MARASCO
PN88

Does the company work on weekends?---I'm not too sure. I don't know the answer to that question.

PN89

So when did the strike that you've said is occurring, when did that start?---There was a stop work meeting on Monday morning.

PN90

This morning?---Forgive me, last Friday morning. And staff did not go back to work.

PN91

MR MARASCO: There was just a couple of other questions, too, your Honour.

PN92

Can you tell the Commission what is the loss that the company is suffering as a result of the strike action?---Well, turnover is approximately $60,000 per day. So that turnover is being lost, but I suppose you'd argue that given that Ford and Toyota are indeed, or were, funding the losses that it be mitigated, but given that there's no funding at the moment my administration is extremely exposed.

PN93

And can you tell the Commission is there a picket line at the moment at the factor?---Yes. I understand that's the case.

PN94

Thank you. I've got no further questions.

PN95

THE SENIOR DEPUTY PRESIDENT: So is this company, it's losing money?
---Yes, absolutely.

PN96

So their costs are greater than their revenue?---Yes.

PN97

So each day they're not working they're losing less money?---There is an argument if you look at it like that. But the overheads continue, your Honour, without any revenue to support it.

PN98

Well, what's the net position? They're better not working?---No.

PN99

So how much are they actually losing?---I haven't done that calculation, your Honour. Employees certainly aren't getting paid.

PN100

Sorry, aren't?---They're not getting paid, no.

PN101

Okay. Mr Wood?

<CROSS-EXAMINATION BY MR ADDISON [3.23PM]

PN102

MR ADDISON: Now, you say the company's turn over is $60,000 a
day?---Approximately, yes.

PN103

Approximately. And you said the overheads continue?---Yes.

PN104

What overheads?---There'll be the rental with the leasehold premises.

PN105

So what's the rent worth a week?---Is it $80,000 per annum, $15,000 a week.

PN106

$15,000 a week?---That's about it, isn't it?

PN107

I wouldn't have thought so. Even my maths are better than that, and my math is a shocker?---You work it out for me then.

PN108

You say it was $80,000 a year?---$800,000.

PN109

$800,000 grand a year?---Yes.

PN110

Okay. No power's getting used if the employees aren't there?---No. There's power to service the security, there's lighting, there's insurance that's ongoing, there's the security itself, my fees and costs continue - I'm here today - I don't know what the number is, but it's certainly- - -

PN111

Your fees would be paid by Toyota and Ford though, aren't they?---Not at the moment, they're not.

PN112

Not at the moment? So who's paying your fees now?---Unless the company has assets, available assets, it will be coming from the available inventory, assuming we're able to realise it. But to the extent of any indemnity, the indemnity is at an end at the moment.

PN113

Okay. Wages are not being paid, I think you've said that?---Yes.

PN114

How much of a saving is that?---I don't know what the payroll is but at the first week of payroll it was $70,000 a week net pay, which we went on last Wednesday.

PN115

So $70,000 is payroll?---I assume so.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN116

And you've terminated the administrative staff, haven't you?---No, I've just stood them down.

PN117

You've stood them down?---In returning to work, yes.

PN118

Okay. I think you said you were approached Friday, a week ago, for a preliminary proposition with regard to the administration. Is that right?---I beg your pardon?

PN119

You were appointed on the 11th, as I understand it, as the administrators? Yourself and the other administrator?---Rod Slattery.

PN120

Slattery, yes, that's right. Thanks for that. You were appointed on the 11th, last Monday?---Yes.

PN121

I think you said on the Friday prior to that, which would be the 8th, you were approached in a preliminary sense?---It may have been 10 days prior to the 11th. There about.

PN122

I thought you said in your evidence, and I'm being corrected, but I thought you said in your evidence that you had initially made contact with the unions on the Friday after you'd been approached in a preliminary sense?---I beg your pardon, yes.

PN123

Yes?---Yes. I understand that I asked Mr Slattery to do that.

PN124

That's fine?---Yes. That's what I said, he did that.

PN125

Can you tell me who approached you in a preliminary sense on the Friday?---No one approached us, we approached the unions.

PN126

Yes, I understand that. But you said - as I understood it, and I'm may have listened to it wrong - I thought you said that you had been approached and as a consequence of that you had then approached the unions and told them that this was likely to happen?---That we had been approached by the company.

PN127

By the company?---Yes.

PN128

Who in the company?---Mr Duskovic, the CEO, via his accountants.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN129

Okay. And you said by majority resolution, the board then appointed you on the Monday?---Yes.

PN130

Was that board meeting on the Monday?---Yes.

PN131

Can you tell us who's on the board?---Yes. Michael Duskovic and Dean Nedovic.

PN132

And they're the sole directors?---Yes.

PN133

Now, they are also directors of other companies, aren't they?---I understand that's the case, yes.

PN134

Yes. You know that they're directors of Icon Plastics, don't you?---I beg your pardon?

PN135

You know that they are directors of Icon Plastics?---I know that Mr Duskovic is, but the other director I'm not sure of.

PN136

And do you know what Icon Plastics do?---No, other than manufacture plastic products.

PN137

So you have got no idea what the business of Icon Plastics is?---No.

PN138

No?---No.

PN139

Okay. Now, when you were first appointed did you do an investigation as to what the company's net assets were?---That was conducted pre appointment.

PN140

Okay. And can you tell the Commission what the net assets of the company are?
---Without looking at the specific numbers which the information isn't before me- - -

PN141

I think ball park will do us?---I have determined that the majority of assets were charged to a financier and that the available assets which would be applicable to my administration with which to fund both it and indeed employee entitlements were limited to the inventory on hand, which we estimated $400,000. Even at that stage, pre appointment we had reviewed the documentation of GE Finance, the financier, and it had purported to what we interpreted to even charge the inventory as fixed. Subsequent to negotiations with it, we were able to have that inventory released from the fixed charge and apply it to floated. But even in that knowledge, given the loss situation and indeed the anticipated costs of my administration pre appointment together with Mr Duskovic, we approached Ford and Toyota for the indemnity that I previously described to fund the administration and to give the company a chance to survive.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN142

When you say you managed to free the inventory from the fixed charge, isn't the inventory party of the floating charge in any event?---Well, that's exactly my understanding of where it should be but the documentation that we had reviewed purported to classify it elsewhere.

PN143

Can you tell us what the details of the debenture are with regard to that
matter?---In what context, sir?

PN144

Well, I presume the paperwork that you're talking about is the debenture?---Yes.

PN145

And that paperwork would set out the agreement between GE Capital and Icon Automotive?---Yes.

PN146

And it would detail how funds are allocated in terms of assets, wouldn't it?---Yes.

PN147

And on what basis does the debenture suggest that the inventory has a fixed charge attached to it rather than a floating charge?---Well, you have to understand that the GE facility is very complex. There isn't just a debenture charge, there's three or four variation agreements to it. Very complex. And there is also a deed that GE required that myself and Mr Slattery execute called a Deed of Funding and Consent and it was under that deed that it made reference to, I think it was section 442A, I think, of the Corporations Act which makes reference to that upon crystallisation of a charge, the floating assets become fixed.

PN148

And I accept that and that's a normal application of corporations law principals, isn't it?---Yes.

PN149

But you are suggesting to me - well, let me withdraw that and start that again. Are you suggesting that there was a crystallisation event which crystallised the fixed charge on to the inventory?---Being the appointment administrator, yes. Correct.

PN150

And that was catered for in the debenture, was it?---Well, that's pursuant to Corporations Act.

PN151

Okay. But I thought you said that the debenture made it clear?---No. You said the debenture.

PN152

Well, I asked the question, I think you said yes, but anyway?---No. You said is the debenture document the charge document and I said yes and I clarified that there was other deeds that vary that.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN153

Sure. Now, in terms of the other assets, you've said there's an inventory there, you've said the inventory's worth $400,000 I think you said?---Yes.

PN154

You said that GE claimed that to be part of the fixed charge but you managed to get that released from the fixed charge into the floating element?---Yes.

PN155

What else is subject to a fixed charge?---The remaining assets. The plant, equipment and the book debts.

PN156

And why are the book debts not part of the floating charge?---Because they're subject to the entire facility of GE that for want of a better expression, so that perhaps the familiarity of the term will help, the debtors are factored. Which means that they are owned by the finance company.

PN157

So they are subject to what's commonly been known as a "blocked account". Is that right?---Yes, correct.

PN158

Have all the book debts been paid into the blocked account at this point in
time?---Yes. I understand that to be the case. I haven't seen any evidence that it's not the case.

PN159

Okay. Have you had access to the blocked account?---My administration pays into that account.

PN160

Indeed, you don't have access to that account, do you?---No. My administration pays into that account. Do I have access, no. It's swept daily.

PN161

And indeed, as I understand the way it works, all of the debts of the company are paid into the blocked account which is an account which is operated by GE not by any director of the company. That's correct, isn't it?---Yes.

PN162

So GE effectively operate as a shadow director. That's correct, isn't it?---No.

PN163

No? Well, how else would you explain it?---Well, I mean I haven't examined the role of GE in terms of shadow directorship. I'd like to see a lot more material before I'm going to pass a comment in that regard.

PN164

Yes. But?---But what?

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN165

Well, how do you explain it?---Well, it's a condition of the facility agreement because those debtors are owned by the finance company that all proceeds be banked into, as you refer to it as the blocked account. And that is the method by which the financier collects his property. It sweeps the account daily and leaves the company with any surplus that would represent the 15 per cent non factored amount.

PN166

So the company has access to- - -

PN167

MR MARASCO: Can I just interrupt at this point. I'm just a bit concerned about the time as well, your Honour. I'm just sort of a bit puzzled about the relevance of these questions. Like, we can go for days and days trawling through fixed and floating charges and debentures, but Mr Addison hasn't asked any questions about the industrial action and we think that that's the relevant point that should be addressed in the cross examination.

PN168

THE SENIOR DEPUTY PRESIDENT: How is this relevant?

PN169

MR ADDISON: I'm glad my friend tells me what's relevant and what's not. These are matters of discretion, your Honour. The union can, in my submission, how the company has got to the position it's at and the reasons behind why employees are left high and dry in terms of their entitlements. These are discretionary questions and it's my submission it would assist the Commission in making it's determination of discretionary grounds if it understands the structure of the company and it's relationship with GE, who is the secured creditor who obviously claims priority on all of the money in the company's purview as opposed to the employees.

PN170

THE SENIOR DEPUTY PRESIDENT: Mr Marasco?

PN171

MR MARASCO: We submit Mr Addison should get halt of the questions and move along a bit given the time.

PN172

THE SENIOR DEPUTY PRESIDENT: I'll allow the question. Mr Addison.

PN173

MR ADDISON: Thanks, your Honour.

PN174

So, can you tell me how the company accesses money to pay it's creditors on an ongoing basis and how it accesses money to pay it's employees on an ongoing basis?---The company raises a sales invoice, it submits it to GE, it then advances 85 per cent of that sales invoice and deposits it into a nominated bank account, which I think is a Westpac bank account.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN175

So the company goes to GE and says to GE I've got to pay for plastic ..... and I owe ..... $50,000 - $100,000 is easier for me for maths - I owe them $100,000 can you give me the $85,000? Is that how it works?---Yes.

PN176

And GE gives them the $85,000 for them to pay their debts?---No, sorry. They raise a sales invoice and GE finance 85 per cent of the sales invoice rendered. And they leave it to the discretion of Icon as to where and whom they pay.

PN177

THE SENIOR DEPUTY PRESIDENT: Where's the other 15 per cent come from?---The other 15 per cent, the company is required to bank 100 per cent of the proceeds into the blocked account Mr Addison referred to and then has access to what they call the undrawn amount representing the 15 per cent, which at the date of appointment I understand was round at $160,000.

PN178

So it has access itself to the 15 per cent?---It has to draw it down, yes.

PN179

But it can draw down 15 per cent?---Yes. And in fact, they've drawn down a considerable sum of that already to pay the first week worth of wages, further monthly salaries which become due for five or six people on Friday, I think it was, it incurs significant purchase liabilities to suppliers that have bought materials already.

PN180

MR ADDISON: Can you tell the Commission how much is in the blocked account?---No. You mean in the undrawn funds?

PN181

No, in the blocked account total. You must know what 15 per cent is because you've accessed it or you have access to it. So you know what 15 per cent
is?---Yes.

PN182

I'm not asking you to do a mass of maths, but if you could just give us a ball park. Well, how much is the 15 per cent worth?---As I said, as at appointment I understood it was worth approximately $160,000.

PN183

So, it would be what, $1.3 million in the blocked account. Is that right?---I don't know how you get to that understanding.

PN184

Is money continuing to go into the blocked account?---It gets banked.

PN185

Sorry?---It gets banked as soon as debtor receipts are collected.

PN186

And have you been collecting receipts during the course of the week?---Yes.

PN187

And have much have you banked into the blocked account?---I don't know.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN188

You don't know? Can you give us a ball park idea?---I don't know.

PN189

No idea?---I know that we've rendered sales invoices up until, I think it was Wednesday of about $250,000.

PN190

Now, since your appointment on Monday you have been told that these companies' difficult position arises as a direct result of Nylex's conduct last October, haven't you?---I beg your pardon?

PN191

Since your appointment last Monday, 11 July you have been told by the company's directors that their troubled state comes about because of a direct result of Nylex's actions last October when they sold the business. That's correct, isn't it?---that's correct.

PN192

You have been told - and we were all told this morning at the creditor's meeting - that Nylex misled the purchasers of the business Icon Automotive, weren't
we?---That's what I have been told, yes.

PN193

Can you tell the Commission what was the misleading and deceptive conduct which is alleged against Nylex with regard to this matter?---That there was
16 employees that were on what they've phrased as light duties which severely inhibits the productivity of the company.

PN194

Now, do you know why that limits the productivity of the company?---Well, if they're on light duties they're not performing their full capabilities and the machines don't operate as efficiently as they possibly could.

PN195

Is that the fact? Do you know?---I haven't examined the roles of each staff specifically.

PN196

So you've got 16 people who are on light duties. Do you know how much incapacity each person suffers?---No.

PN197

No. It's possible, I presume, that some of those 16 suffer mild incapacities. Is it not?---Possible. I mean, these might be questions better asked of management. I'm yet to conduct those enquiries.

PN198

Well, I can only question the people that are put on the box by my friend, unfortunately. So I'm going to have to try and get the answers from
yourself?---Understood.

PN199

And you're giving the evidence with regard to the 16 and the incapacity of the
16, or you have given that evidence. So in reality, you don' know how much incapacity any of these 16 workers suffers, do you?---Not personally, no.

PN200

No. You've simply been told that 16 people are in fact incapacitated to some extent?---Yes.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN201

Have you been told by the directors that had they known of people's incapacity in October last year they would not have bought the business?---No.

PN202

Do you know what this company paid Nylex for the business?---I haven't examined the contract of sale, but from what I can glean from the information before me they paid the auction realisable value of the plant and equipment which was subsequently financed as we've just learnt, they paid $200,000 for goodwill and I don't know what the nominated amount was but they assumed employee entitlements.

PN203

"They assumed employee entitlements" you say?---Yes.

PN204

What was the value of the employee entitlements?---In the event of termination which provides for redundancy, approximately $7 million.

PN205

Okay. And the plant and equipment is worth what amount?---I would say
$2.4 million.

PN206

So effectively, with assuming that the employee entitlements debt, about $10 million?---Sounds reasonable.

PN207

And how many employees, 150 was it?---No. As I understand it about
125.

PN208

16 of whom have got some incapacity?---I understand that's the case.

PN209

THE SENIOR DEPUTY PRESIDENT: Do you know what the entitlements of the 16 are?---No.

PN210

MR ADDISON: Now, you say 80 per cent of the business is Ford and
Toyota?---Yes.

PN211

Can you tell the Commission how much product in dollar terms is sold to Ford and Toyota collectively each week?---I can't specifically answer the question, no.

PN212

You can't answer that question?---Well, if it's $60,000 and you take 80 per cent of $60,000 of which 60 per cent of that is Toyota and roughly 40 per cent is Ford. So, what's that, $30,000 to Toyota and $20,000 to Ford, or thereabouts.

PN213

Sorry, I missed those figures?---If the turnover is $60,000 a day, then if it's 80 per cent of the customs to Ford and Toyota then it's $50,000 in total to both of those, which 60 per cent is attributable to Toyota and 40 per cent is attributable to Ford.

PN214

As I understand your evidence, on Tuesday of last week you had your first meeting with the workers. Is that correct, or was that on Friday?---Maybe
Mr Slattery met with the employees. It wasn't myself.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN215

Okay. I may well have this wrong, it might have been Friday. But you gave evidence that you said to the workers at some point that your intention as to try and save the company and the business?---That was on Friday, yes.

PN216

That was on Friday?---Yes. There had been previous addresses by Mr Slattery to that same effect, but carry on.

PN217

Okay. In terms of that statement, I guess, is it your evidence that there is a realistic basis for saving the company and the business?---Well, to the extent that I'm going to endeavour to do so, yes. There's never any guarantees, Mr Addison, but that's the charter that I was given by the board and I was in the process of doing it.

PN218

Yes. Now, in terms of cutting the figures, if you like, is there a realistic basis for turning this company from a loss maker into a profit maker in the near
future?---Well, I think there's a prospect. I mean, you must appreciate that before the strike was called I'd only been there for four days and had not commenced the various negotiations and applications that I needed to, to form a more accurate opinion in that regard.

PN219

In terms of restructuring the company, you've been pursuing an idea of terminating 16. Is that correct?---Up to 16, yes.

PN220

Up to 16, yes. I think that's right. And is that based solely on the fact that they are the people that have some form of incapacity?---Yes.

PN221

Right. Have you had any advice with regard to your potential liability in terminating people's employment on that basis?---No.

PN222

And if you were to terminate the 16, would that allow you to continue to make the product?---I hadn't made those inquiries.

PN223

You haven't made those inquiries yet?---Well, I was in the process of doing so with conjunction with management and with the union.

PN224

You agree with me it would be pointless to terminate the 16 if you couldn't then make the product?---Absolutely.

PN225

And how much would it cost the company if it was to meet it's obligations under the certified agreement to terminate the 16 people?---I haven't arrived at those calculations.

PN226

Do you have a - I withdraw that. Have you had any discussions with - I'll start that again. Ford and Toyota are paying your fees. That's correct, isn't it?---Yes.

PN227

Up until, what? So long as parts flow?---Yes.

PN228

Can I ask you how that agreement was arrived at?---By asking.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN229

And who asked Toyota and Ford?---I did.

PN230

You did?---Yes.

PN231

And why did you ask that?---Because I was aware that the company was in losses and had a marginal amount of available assets in which to fund those assets and indeed my costs.

PN232

And when did you approach Toyota and Ford with regard to that request?---In the week leading up to my appointment.

PN233

So it was the week prior to 11 July?---Yes. It was a condition of me and
Mr Slattery of accepting the appointment of having those indemnities in place.

PN234

And who did you meet at Toyota and Ford?---At Toyota I met with Mr Jakobi and two of his colleagues, who's name I can't recall, and at Ford it was Eileen Kean and Jacob Kampi.

PN235

And do they pay 50 per cent each?---No. It's 60 per cent Toyota and 40 per cent Ford.

PN236

So it's on a pro rata basis with parts that they get, is it?---Yes.

PN237

Yes?---Based on a historical .....

PN238

THE SENIOR DEPUTY PRESIDENT: Is that a convenient point?

PN239

MR ADDISON: It is, your Honour.

PN240

MR MARASCO: Your Honour, given the importance of the matter and likelihood of Ford and Toyota having to stand down several thousand employees if the matter isn't resolved, is there any possibility that we can continue the matter later today?

PN241

THE SENIOR DEPUTY PRESIDENT: No. The best I can do is 8.30 tomorrow morning. I'll adjourn this matter until 8.30 tomorrow morning.

PN242

MR MARASCO: If the Commission pleases.

PN243

MR WOOD: Sorry, I understand you just made the adjournment order. I did want the opportunity to address the Commission very briefly as a follow up to the issue by Mr Marasco, if I may. I understand your Honour has another appointment in another place. The submission I wanted to make is as follows. That Mr Marasco indicated quite correctly there had been stand downs already, I'm instructed, at Ford. I understand that this matter will resume tomorrow. We would like the opportunity for the Commission, in the interim period, to make interim orders under section 127(3)(a) of the Act. We do so on the basis that there is a prima face case for the jurisdictional aspects having been made out.

**** WAYNE EDWARD BENTON XXN MR ADDISON
PN244

There is clearly a direct and immediate impact of this industrial action occurring and moreover, it's clear from the evidence presented already that there is to be a meeting tomorrow morning of the relevant employees. And we say that an order, even on an interim basis which were made this evening, would have a significant impact on the ability of resolving this dispute. I apologise for making that application so late, but I believe it is a worthy application which should receive consideration.

PN245

THE SENIOR DEPUTY PRESIDENT: Well, you can make it again at
8.30 tomorrow morning. I will now adjourn.

<ADJOURNED UNTIL TUESDAY 19 JULY 2005 [3.56PM]

LIST OF WITNESSES, EXHIBITS AND MFIs

WAYNE EDWARD BENTON, SWORN PN38
EXAMINATION-IN-CHIEF BY MR MARASCO PN38
CROSS-EXAMINATION BY MR ADDISON PN101